Indra Sistemas SA Q4 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Varun Rajwanshi - JPMorgan Chase & Co, Research Division - Analyst : I have 2 questions. First, on your growth expectations by different segments for 2022. So by defence, Air Traffic Management, Transport and Minsait divisions. Can you give us some qualitative expectations for this year? And secondly, on margin evolution, what impact from the pandemic in terms of delays and milestone recognitions and supply chain issues, are you modeling for 2022 because these issues should reverse at some point in time?

Question: Ben Castillo-Bernaus - BNP Paribas Exane, Research Division - Analyst : Just to come back on Minsait, strong into the year in Q4 with revenues up in the mid-to-high teens, but the operating margin well below your recent run rate. I know you said some of that is due to variable comp. I just can get your sense on how much that was variable, how much of that is a higher fixed cost base? And does this inflationary environment that we're now in also the midterm profitability ambitions of the Minsait business? Any commentary there would be helpful. And then lastly, on the potential increase of the state's involvement to the extent you can, how do you communicate that message to your investors? And how do you view potential additional involvement or higher investment fee?

Question: Nicolas David - ODDO BHF Corporate & Markets, Research Division - Analyst : Yes. Good evening, and thank you for taking my questions. First one would be a very quick follow-up on the previous question regarding Minsait profitability. I appreciate the detail. I mean, if you take Q4 margin, it's down 240 bps year-on-year. Could you give us a sense of if this bonus variation was maybe costing 2/3rd or 90% of that or 50% of that would be a really appreciate to have some color regarding that? And also regarding the trend for H1 versus H2 '22 profitability from Minsait, do you expect it I would say, the salary inflation, this underline inflation trends to impact or negatively your profitability in H1 and in H2? Or do you expect it to be to be even during the year? Second question regarding Minsait is should we be aware of some exceptional revenue in Q4 because Q4 was really, really strong in terms of top line. Should we be aware of some exceptional revenues that boosted the growth? Or it's really an underlying performance and you are embedding to some very strong growth in Q1. And I have then another question. I'm trying to reconcile your revenue growth guidance at group level for 2022. I mean, your guidance is above 3.5% growth at constant currency, while you seem to expect above 5% growth both for T&D and Minsait. So what kind of buffer are you taking there? Is it only the FCAS contract? Or do you have something else in mind? And last question is just a housekeeping question is, what will be the level of exceptional charges to expect in 2022?

Question: Nicolas David - ODDO BHF Corporate & Markets, Research Division - Analyst : Okay. That's clear. And if a question regarding exceptional items.

Question: Nicolas David - ODDO BHF Corporate & Markets, Research Division - Analyst : Yes. And I had a last question regarding the exceptional item below the line. I mean, at first level.

Question: Nicolas David - ODDO BHF Corporate & Markets, Research Division - Analyst : For '22, it's like should we expect traditional restructuring like the EUR 20 million to EUR 30 million restructuring below operating profit -- sorry, my question was not clear. Should we expect at group level to have some exceptional charges below the operating profit and leading to your EBIT guidance?

Question: Nicolas David - ODDO BHF Corporate & Markets, Research Division - Analyst : Okay. Congrats for the very strong results.

Question: Manuel Lorente - Mirabaud Securities Limited, Research Division - Analyst : My first question is on the (inaudible) situation. I was wondering whether you have managed to talk with (inaudible) in order to address how are they going to proceed in the coming weeks, months, especially regarding as they were stated in the statement that they were planning to build the stake without any meaningful impact on share price, which intrigues me.

Question: Manuel Lorente - Mirabaud Securities Limited, Research Division - Analyst : That's my first question.

Question: Manuel Lorente - Mirabaud Securities Limited, Research Division - Analyst : Are you planning to ask them?

Question: Manuel Lorente - Mirabaud Securities Limited, Research Division - Analyst : I believe it was implicit in the first one, but...

Question: Manuel Lorente - Mirabaud Securities Limited, Research Division - Analyst : Okay. So my second question is on guidance. I believe that Cristina was saying that you expect margins on Minsait to be the on the 5%, 6% range this year. So assuming the low range of the guidance, which implies roughly 40 basis points of margin improvement versus 2021. That will imply REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 23, 2022 / 5:30PM, IDR.MC - Q4 2021 Indra Sistemas SA Earnings Call that TMD will be roughly stable this year. That's the correct way to see the guidance, all the margin improvement for this year should come from Minsait?

Question: Manuel Lorente - Mirabaud Securities Limited, Research Division - Analyst : Okay. And so on Minsait then, how are you modeling this year? I mean, the majority of the margin improve comes exclusively from the [Angola] elections. We have any other moving part to bear in mind or does the guidance itself reflects Angola anyway?

Question: Manuel Lorente - Mirabaud Securities Limited, Research Division - Analyst : So probably my final question on guidance then. So it is fair to say then that from the very key relevant aspect that the market was expecting for this year, we have Eurofighter with lower contribution versus 2021. FCAS, we have very limited contribution this year because of delays, next-gen -- generation projects, very limited contribution this year because of delays and elections, very limited confusion this year because of the multi-annual nature of the contract. That should be the correct way to analyze this very relevant moving parts and key drivers for the profitability of the group for this year?

Question: Manuel Lorente - Mirabaud Securities Limited, Research Division - Analyst : Okay, and just my final question, sorry. Given the pretty strong free cash flow generation and with the current net debt levels, why are you not launching any more, let's say, friendly shareholder remuneration type of plan? I mean, you are saying that on the M&A front, we shouldn't expect nothing relevant, just bolt-on. So I don't know, with the current capital structure, don't you think that there is room for being a little bit more friendly on this to shareholders?

Question: Manuel Lorente - Mirabaud Securities Limited, Research Division - Analyst : But it's not a matter of having a very good year. It's a matter that you already have had a very good year this year.